Contracts and performance

Standard contract forms

What standard contract forms are used for construction projects in your jurisdiction? To what extent do parties deviate from these standard forms?

The Public Works Authority has its own form of construction contract, which it uses for most of its projects.

Other government projects use several other forms of contract, such as the International Federation of Consulting Engineers yellow, silver or red book contracts and occasionally Joint Contracts Tribunal contracts, Association of Consultant Architects contracts or New Engineering Contracts. On most occasions, these contracts are heavily amended in favour of the employer.

Definition of ‘construction work’

How is ‘construction work’ legally defined?

The Civil Code does not define ‘construction work’. However, Article 682 of the code defines a ‘construction contract’ as an agreement under which either party undertakes to construct a structure or to perform any work for the other party against wages and without being an agent or representative of such party.

Governing law

Are there any rules or restrictions on the governing law of construction contracts?

Qatari courts will normally uphold a governing law other than Qatari law regarding contracts. However, this does not apply to any provision of the law which the courts deem to be contrary to any mandatory provision of Qatari law or to public order or morality in Qatar.

Formalities

Are construction contracts subject to any formal requirements?

Construction contracts do not require any formal attestation from government authorities. Although construction projects require certain approval and construction professionals require certain licences, construction contracts do not require any attestations; they become legally binding once validly signed by each party.

Mandatory/prohibited provisions

Are there any mandatory or prohibited provisions in relation to construction contracts?

There are no specific mandatory and prohibited provisions in relation to construction contracts as the law does not prescribe any specific form of contract. However, as a general principle, a construction contract should not carry any provision in violation of Qatari laws or against public order.

Implied terms

Can any terms be implied in construction contracts?

Under Article 169 of the Civil Code, where the language of the contract is clear, it may not be subject to interpretation regarding the parties’ intentions. However, if the language is unclear and requires interpretation, the contract must be interpreted by deriving the parties’ intentions based on the nature of the transaction and their good faith. During such interpretation, the literal meaning of words should not be taken into consideration.

Risk allocation

How are risks typically allocated between parties to construction contracts?

Under the Civil Code, contractual liability is valid for 15 years. Additionally, Article 711 of the code holds the contractor and the designer jointly liable for the structural integrity of construction works. This liability lasts for 10 years and cannot be limited.

Limitation of liability

How and to what extent can parties to construction projects contractually limit or exclude their liability?

The Civil Code provides parties with freedom of contract; therefore, contractual terms which either exclude or provide damages are mostly binding on the parties. However, under specific provisions of the Civil Code (eg, Article 715), the design liabilities of contractors and designers cannot be excluded.

Under Article 266 of the Civil Code, where there are liquidated damages the agreed amount may be waived if:

  • the defaulting party can show that no loss has been suffered by a non-defaulting party;
  • the level of the pre-agreed damages was excessive; or
  • the obligation has been partially performed.

Liquidated damages

How are liquidated damages typically calculated and to which liabilities are they usually applied?

It is customary in the construction sector to cap liability for liquidated damages at 10% of the total contract value. Since the law does not cap liquidated damages, the parties may fix the overall contractual liability up to full contract value. However, certain types of liability cannot be capped or limited, as explained above.

Usually, parties apply for liquidated damages where there has been a delay to the agreed timeframe. This is applied to both contractors and consultants.

Force majeure

How are force majeure clauses treated in your jurisdiction? Is there a legal definition of force majeure events?

Under Article 188 of the Civil Code, ‘force majeure’ is a reason beyond the control of a party which makes it impossible for it to perform its obligations under the contract. Although Article 171(1) of the Civil Code relieves a party from performing its obligations in the event of an unforeseen event beyond its control, such provisions should be referred to as ‘difficulty’ provisions, rather than force majeure. The main difference between difficulty and  force majeure is the element of impossibility associated with force majeure.

In the event of force majeure, the affected party is relieved from performing only that part of its obligation which is impossible due to reasons beyond its control. Any other contractual obligation not affected must be performed. As soon as the cause of force majeure ceases, the corresponding obligation must be performed.

General performance obligations

What are the general performance obligations of contractors and employers?

The general obligations of contractors and employers are provided in Articles 687 to 700 of the Civil Code. On the one hand, a contractor must conduct works as per the provisions of the contract and within the agreed timeframe without any defects. On the other hand, an employer must perform its part of the contractual obligations, including:

  • supplying materials (if agreed);
  • supplying designs (if not under the contractor’s scope);
  • inspecting works before the handover; and
  • making payments by the agreed deadlines.

Project delays

How are project delays typically handled? Do any set rules, restrictions or procedures apply in this regard?

Construction contracts usually specify the events that entitle a contractor to an extension of time in case of delay. These mostly relate to events out of the control of the subcontractor. Further, the Civil Code identifies force majeure, as well as events which may cause difficulty, and entitles the subcontractor to an extension of time or termination of contract if such extension is onerous to the employer. In cases where force majeure does not apply, contractors are normally penalised for any delay in completing a job. The penalty may be based on a pre-agreed amount for each day that the project is delayed. Employers usually liquidate the performance bonds to cover any losses cause by the delay.

Contract variations

To what extent can the parties make variations to the contract? Do any set rules, restrictions or procedures apply in this regard?

Since no specific form of construction contract is universally applicable in Qatar, parties often design the contracts in a way to vest substantial powers with the client regarding, among other things:

  • price variations;
  • time extensions; and
  • extension of scope.

In contracts based on estimated measurements, Article 708 of the Civil Code entitles a contractor to request the employer to increase costs if the actual costs exceed the estimation. In response, the employer is entitled to terminate the contract if the difference in costs is significantly high.

Under Article 709 of the Civil Code, in case of amendment in designs, a contractor is not entitled to demand increase in payment if the contract is based on a lump sum.

Termination

What are acceptable grounds for the termination of a contract?

Under Article 704 of the Civil Code, a construction contract can be terminated if its performance becomes impossible due to an external reason beyond the control of either party. Further, under Article 705 of the code, a contract can be terminated on the death of a contractor, provided that its heirs are unable to take over the work due to the contractor’s specialist knowledge.

Remedies for breach

What remedies are available for the breach of construction contracts?

According to Article 707 of the Civil Code, if the employer breaches the contract by unilateral termination, the contractor is entitled to payment for:

  • the work completed;
  • expenses incurred; and
  • the loss of profit that the contractor could have made had the employer not terminated the contract.

In contrast, where there has been a breach of contract by a contractor (eg, non-completion of work within the agreed timeframe, poor quality of work or defective work), the employer’s remedies may include:

  • liquidation of performance bonds;
  • taking over the contractor’s work;
  • back charging the contractor at the market rate; and
  • retaining the contractor’s payments.

Click here to view the full article.